ARCHOSStrategic positioning

& perspectives

1. Positioning. Mobile Audio/Video TV-centric . Mobile Audio/Video PC-centric. Mobile Audio/Video IP-centric

2. Competitive advantage3. Unique opportunities3. Financials

ARCHOSmakes the best

portable entertainment devices, period.

Positioning1. Mobile Audio/Video TV-centric

a. Mobile DVR b. Digital Link to STB c. Autosync with STBd. DVB-T Recorder

2. Mobile Audio/Video PC-centric3. Mobile Audio/Video IP-centric

Competitive advantageOpportunitiesFinancials

a. Mobile DVR (Digital Video Recorder)

• TV is by far the 1st source of media content • An American spends 4h/day in front of his TV set • DVRs allow very easy recording of any show in DVD quality

• Strong growth pulled by DVRs and portable DVD players• ARCHOS is the market leader • Technology leadership resulting from 4 years of sustained R&D effort

• Now, 4th product generation of Archos Mobile DVRs• AV100 in 2002, AV300 in 2003, AV400 in 2004, AV700 in April 2005…

Strong growth pulled by

DVR Set-Top Boxes(Digital Video Recorder)

• Dual tuners to receive and record 2 channels simultaneously– 1st tuner for the current channel played back while being recorded on internal hard

drive– 2nd tuner to record simultaneously a second channel as a background task

• Inside the box are stored in digital encrypted form:– all the TV you have watched lately as well as – the TV you have planned to watch

• EchoStar/ARCHOS joint venture:– transfer directly the digital encrypted content from STB to Mobile A/V Players

b. Digital Link to STB

• Range of 3 DishPods developed for EchoStar• Commercialized by EchoStar with the ARCHOS brand • Ultra-fast direct transfer of encrypted media content from STB to AV Player

– Automatic Synchronization – 1 full movie transferred in 1 or 2 minutes

• 2/3d of STBs are now with DVR functionality • Introduction in Q4 2005• High volume anticipated in 2006

c. AutoSync with STB

Guide TV en ligne

STB

AV500

AV700

STB directly controls DVR

Utterly simple: � Using STB’s remote control, select

recordings from STB’s online EPG (Electronic Programming Guide)

� STB will automatically switch to programmed channel and set AV400 or AV700 to start/stop recording on schedule

Using one STB remote control: � 1 remote control of STB� 1 channel guide of STB

200 million STBs:• Potential of 200+ millions STBs worldwide

d. Mobile DVB-T Receivers & Recorders(Digital Video Broadcasting – Terrestrial)

• Adapted from ARCHOS range of Mobile DVRs• Dual DVB-T tuner and antennas built in Mobile AV Player • Viewing of live or recorded video • Automatic recording scheduler using online TV guide• Reception possible inside buildings • Reception possible inside moving vehicles (car, bus train…)

Positioning1. Mobile Audio/Video TV-centric2. Mobile Audio/Video PC-centric

a. Mobile Audio/Video Playersb. Mobile Audio Players

3. Mobile Audio/Video IP-centricCompetitive advantageUnique opportunitiesFinancials

a. Mobile Audio/Video Players

• 3 technological breakthroughs that no one competitor can align:1. Full compatibility with Microsoft’s Windows Media Technology: AutoSync with

Windows Media Player 10, Windows Media Video 9, Windows Media Digital Right Management

2. Compatibility with MPEG-4 / DivX in full DVD resolution (720x566)3. USB Host to connect digital cameras (direct transfer of photos)

• Only credible competitor against iPod Video• Full range with 2.2”, 4.3” & 7” LCd ���� iPod 2.5”• DVD playback resolution, 4 times better D1(720x566) ���� QVGA(320x240)• Compatible with MS WMV and DivX• Supports digital cameras• Camcorder• Video Recording

b. Mobile Audio Players

• Highly competitive market, high volume, very low margins • 20% price drop by Apple recently

• Evolution of functionalities towards more Photo & Video • Lead by Microsoft’s Windows Media Technology™

• ARCHOS Positioning • Price fighter players at entry level (start from 3GB) • Audio/Video players like Gmini 400 in the high end

Positioning1. Mobile Audio/Video TV-centric2. Mobile Audio/Video PC-centric3. Mobile Audio/Video IP-centric

- Pocket Media Assistant

Competitive advantageUnique opportunitiesFinancials

Pocket Media AssistantARCHOS

launches the PMA with

direct connection to Internet • Built-in WiFi• Direct connexion to new video services:

Video Streaming, Video Download, TV over IP…

• At home, direct connection to Internet through ADSL router (Livebox, Freebox,…), no need for a PC

• On the move, from any hot spot: airport, train station, cyber cafes…

1. Strategy2. Competitive advantage

. Technology leadership

. Intellectual Property build-up

. Strategic partnerships3. Unique opportunities4. Financials

Technology leadership

• 2000: 1st HD-based MP3 player, over 1 year before Apple• 2002: 1st mobile video player in 2002• 2003: 1st mobile video recorder in 2003• Now, 4th product generation of Archos Mobile DVRs

• AV100 in 2002, AV300 in 2003, AV400 in 2004, AV700 in April 2005…

• 2005: 1st Wifi IP-Centric mobile video recorder (PMA400)• 2005: 1st Digital transfer from STB with satellite TV encryption • 2005: 1st Direct control of Mobile DVR from STB (EchoStar, CANAL+ …)• 2005: 1st Mobile DVB-T Recorder & Receiver

Intellectual Property Build-up

• Key IP in TV-Centric Mobile DVRs– Several patents about TV Cradles: digital link to STB, recording circuitry inside TV

cradle, connections to TV and STB, control from STB…– AVOS: proprietary multimedia OS for Mobile DVRs developed over 5 years – AVUX: AVOS multimedia engine ported onto Linux

• Key IP in TV-Centric DVB-T receivers and recorders – Patent pending on dual antenna for diversity reception inside buildings or vehicles– 1st mobile DVB-T DVR

• Key IP in DRM technology– TV through partnership with EchoStar, CANAL+, Nagra, NDS…– PC through partnership Microsoft

Strategic partnerships• Strong commercial & capitalistic partnership with EchoStar

– EchoStar: 26% of ARCHOS (convertibles)– EchoStar to commercialize DishPods with ARCHOS brand

• 35 Million active STBs• 20000 retailers in the US

• Encrypted data exchange between mobile player and STB – Partnership with EchoStar: range of 3 mobile video players – Partnership with Nagra and NDS: adapting STB encryption to Mobile Player

• Direct control of Mobile DVR from STB – Partnership with CANAL+: control of DVR through serial port– Partnership with EchoStar: control of DVR from data packet inserted in video signal

• Partnership with Microsoft– Full porting of Windows Media Technology: Media Transport Protocol, Windows

Media Player Autosync, Windows Media Video, Windows Media Audio, Windows Media DRM, Windows Media Connect…

1. Strategy2. Competitive advantage3. Unique opportunities

. TV partnerships

. VOD partnerships4. Financials

TV partnerships• Leverage technology leadership and partnerships with EchoStar and CANAL+ to• Multiply partnerships with TV operators to offer mobile video players to

take away your TV content everywhere with you.

VOD partnerships• Apple with the iPod Video has opened wide a new era for video download

• Every link in the content distribution chain now wants to open its own video download web site to compete against Apple

• ARCHOS’ range of portable video players if the only credible alternative to the iPod video

Content Publisher

Content Agregator

ServiceProvider

AccessProvider

End user Content Creator

SearchEngine

1. Strategy2. Competitive advantage3. Unique opportunities4. Financials

- 2005 trend - 3-year projection

2005: Worldwide presence (w/o EchoStar)

ASIA8%

USA26%

EUROPE66%

0

10

20

30

40

50

60

USA EUROPE ASIA

USA

EUROPE

ASIA

% 2005 Turnover by region

+ 35%

+ 41%

+ 75%

2005 growth by region

2005 TV & PC «Centric»: growth drivers(w/o EchoStar)

0

10

20

30

40

50

60

TV Centric PC Centric IP Centric Misc

2004

2005

+ 89%

+ 31%

N/A -100%

Key figures (w/o EchoStar)

2005 Turnover

90 M€

Gross Margin2 3.4M€@ 26% +

Operating Expenses22.7M€

EBIT+0.5M€

2004 Turnover60 M€

Gross Margin16M€

@ 26.5%

Operating Expenses21M€

EBIT (5M€)

Expansion Structure Planification

Break evenTurnover 85 M€

Gross Margin22M€ @ 26%

Operating Expenses22M€ EBIT 0M€

Strong P&L improvement 2005 versus 2004

� Revenue expected to growth by over 50% for year 2005

� Gross margin improvement thanks to product portfolio upgrade

� Stabilized and controlled operating expenses

� EchoStar revenue estimated round 6 M€ for Q4

Archos Consolidated Reporting

in 000' EUR S1-2005 Q3-2005 Q4-2005 S2-2005 FY2005

RevenueTotal 32,147 24,077 33,776 57,853 90,000

Gross Margin 7,997 6,395 8,972 15,367 23,364

% of revenue 24.9% 27% 27% 26.6% 26%

Total operating expenses 9,821 6,313 6,570 12,884 22,705

% of revenue 31% 26% 19% 22% 25%

EBIT (1,824) 82 2,402 2,484 660

% of revenue -6% 0% 7% 4% 1%

w/o EchoStar

2005: a year of transition • Reviewed sub-contracting model

– Diversified, best in class quality, best in class flexibility

• Improved working capital– Canon agreement, turnkey

• Strengthened finance structure – EchoStar cash injection, banking relation ship, share price

• Balanced mix & product range margin– XS line, Gmini & AV line

• Focused on operational improvement – Returns management, Excess and Obsolescence & logistic

-9%

5%

8%

> 0%

0

20

40

60

80

100

120

140

160

180

200

220

240

2004 2005 2006 2007-9%

-4%

1%

6%

11%

Turnover

EBIT

Middle term plan 2005 - 2007 (w/o EchoStar & other partnerships)

« A managed growth, below the market trend will result in twofold increase in turnover over two years allowing ARCHOS to reach 8% EBIT versus revenue w/o EchoStar contribution»

M€

“Continuing diversification & reducing risks whilst sustaining profitable growth”

� Develop Product Portofolio

� Enrich Distribution Network

� Improve Customers Paretto

� Balance Geographical Coverage

� Build up Finance Structure

� Balance Production

� Balance Sourcing Panel

Middle Term ARCHOS business Model (w/o EchoStar & other partnerships)

Net Revenue 100%

Gross Margin 26 / 28%

R & D / Quality ( 6 % )

Sales & Marketing ( 8 / 10% )

G&A ( 5% )

Operating Margin 8%

(20%)

Forward looking statement

This presentation contains forward-looking statements, including the statements regardingexpected gross margin, operating and net income, and tax rate range for Fiscal 2005, ourlong term financial business model, expected product introductions for Fiscal 2005, thecontinuing demand for our retail products, and for retail and OEM sales.

These forward-looking statements involve risks and uncertainties that could causeARCHOS performance to differ materially from that anticipated in these forward lookingstatements.

Factors that could cause actual results to differ materially include:� Our ability to timely introduce successful products

� The effect of pricing, product, marketing and other initiatives by our competitors and our reaction tothem on our sales, gross margins and profitability

� Our ability to match production to demand and to coordinate the worldwide manufacturing anddistribution of our products in a timely and cost-effective manner

� Our operations in China being adversely impacted by strains on Chinese energy, transportation, orother infrastructures

� Changes in consumer purchasing trends

� Changes in financing strategies

� Fluctuations in exchange rates